U.S. debt crisis: Three-month extension is merely a re-loading break

David T Jones

David vs. DavidOctober 17, 2013

WASHINGTON, DC - OCTOBER 17: U.S. President Barack Obama makes a statement at the State Dining Room of the White House October 17, 2013 in Washington, DC. Obama said the American people are completely fed up with Washington and called on cooperation to work things out. (Photo by Alex Wong/Getty Images)

Doomsayers depicted the United States at the edge of a fiscal cliff waiting for salvation from “Godot.” Ostensibly, we didn’t know whether there was a safe path downward, a hang-glider to waft us away, or whether we would plunge into the abyss.

But the bullet was dodged; “Pauline” escaped the oncoming railroad train.

Nobody, however, should believe the three-month extension of U.S. government operations and the debt ceiling is a solution. Not even an armistice; it is more of a re-loading break. And anyone expecting positive results from the bipartisan conference addressing major fiscal issues by mid-December is deliberately delirious.

There are two facets to continuing confrontation: government spending and the debt ceiling. But the existential issues are politics within both Democratic and Republican parties.

The Shutdown. The government shutdown — no matter how long it persisted — was a domestic problem. Only 800,000 of over 2.6 million federal workers were furloughed; those required to work (military personnel, border guards, air traffic controllers) will be paid; many were recalled earlier. Tourists unable to see national monuments and/or Washington sites were sob story exercises (and WWII vets abetted by Republican senators forcing their way past barriers to honor fallen comrades at the WWII memorial gave the National Park Service a well-deserved black eye). Ultimately, these closures consequences — as was the case for “sequester” — were relatively trivial.

Republicans sought various codicils to reduce government spending, offering to fund specific activities. Democrats rejected any face-savers; insisting on all-or-nothing funding. Democrats had the votes — and Republicans the blame.

The Debt Ceiling. Moreover, the much bruited-about Oct. 17 “ceiling” actually had substantial fiscal flexibility. The U.S. government would not have been bankrupt; it has significant continuing tax revenues to pay outstanding debts, but could not contract debt above that ceiling. Economic/fiscal professionals identified this reality, but media-politicians preferred the dramatic event of a “scarecrow” ceiling.

And, oh yes, health care — the proximate cause of the current contretemps.

The innocuously-named Affordable Care Act, aka Obamacare, is — for Canadians — a relatively trivial adjustment in health insurance. For “single payer” Canadians, Obamacare would be a step backwards. For Americans, however, it is revolutionary in requirements, funding, extent, and prospective consequences.

Obamacare teaches Republicans a salutary lesson: don’t lose the 2008 election. Or at least don’t lose so badly that Democrats control not just the presidency but both houses of Congress. Obamacare reflects this defeat; implemented without one Republican vote, it remains substantially unpopular — it could not pass today’s Congress.

— and the Tea Party? Critics blame Tea Party (strongly conservative Republicans) for the impasse. They are right ... but. Following its 2008 electoral catastrophe, Republicans were regarded as political roadkill; it would be Democrats as far as the eye could see. However, Tea Party activists, stimulated by legislative excesses and “out-of-control” government spending, galvanized anti-Democrat resurgences, resulting in congressional victories in 2010 and 2012.

So Republicans continue to resist Obamacare implementation. They persist partly from a principled conviction that Obamacare will de facto lead to socialized medicine; expand the “welfare state” social service expenses aborting other priorities (defense, infrastructure) and necessitate higher taxes; dilute health care quality by adding tens of millions of free-riders without expanding medical service providers; and reduce available funds for medical R&D as monies funnel into individual health care.

The Supreme Court ruled Obamacare is a tax, not a constitutional right. Thus, whether one participates or not, government will tax non-participating individuals and businesses under complex formulae. U.S. health care will become the medical equivalent of a “union shop” wherein everyone must pay union dues to work.

Consequently, Democrats and chattering class media, in effect, say “Nah-nah; sore losers; admit we won.” But Obamacare is not “settled law” as Democrats insist. No more than “separate but equal” segregation was settled law. No more than abortion parameters or gay marriage are settled law.

Ultimately, to the discerning, the crisis was vastly overblown; more ritualized Kabuki Theater than raging tsunami. The issue is not the problem’s real fiscal merits; today it is a fight over who gets the blame. Tomorrow, in January or February 2014, will be another round of manoeuvering for the November congressional elections.

David T. Jones is a retired State Department Senior Foreign Service Career Officer and a frequent contributor to American Diplomacy. During a career that spanned over 30 years, he concentrated on politico-military issues, serving for the Army Chief of Staff. He is co-author of Uneasy Neighbor(u)rs, a study of American-Canadian bilateral concerns and has published several hundred articles, columns, and reviews on U.S. - Canadian bilateral issues and general foreign policy.